Tag Archives: Recession

Finding and Fixing a Free Market

I wrote in a blog last year that the recession would end when the media said it had ended. My contention was that businesses and consumers were basing their buying decisions on their perception of the market as depicted in media reports. The news reports were full of panic, so consumers panicked. Joblessness hovered above 10 percent and people held onto their money out of fear.

Now the media tells us that the recession is over. Now we should be able to breathe a collective sigh of relief as the economy rises to its feet once again and we can go on with our consumer-minded lives. The problem is that the while the recession may be over, the danger is not. Businesses are using this “breathing room” as an opportunity to recoup losses from their profit margins during the recession. Consumer prices began spiking in December and continue to go up across all markets. Gas, groceries, dining out, cars, even cable and cell phone rates have all steadily increased since December.

The price of regular unleaded gas in the beginning of December in Houston was 2.69 and today it is 2.99; an increase of 30 cents in two months. At my local grocery store, Milk has gone up almost 50 cents per gallon while 75/25 ground beef has increased from $1.69/lb to $2.39/lb. The price of a soft drink at your average restaurant was $2.25 and it’s now $2.75 (one restaurant charged $2.90). Airlines are raising fares and baggage fees and phone providers are raising monthly service rates while cutting handset discounts. If businesses continue with the profit taking, we could risk another recession or even a complete collapse of the market.

Across the “free” market, profit taking is rampant and we the consumers are shelling out more of our hard earned money while our employers are not raising our pay to keep pace. I think we should all go to our bosses and say “In light of the current economy and market prices, the cost of my service is going up. My new rates will be X.XX per hour effective in the next billing cycle.” Of course if we did that, we would get an emphatic “no” or worse, we would get fired. Perhaps that is the attitude we should have when we shop.

We took my wife’s car in for a brake job to Just Brakes because they offered $99.88 service for all four wheels. They advertise that shoes, pads and machining rotors and drums are all included in that price “in most cases.” That kicker at the end is where they get you. If they don’t have your model in stock, you pay significantly more. I surmise that they have a stockroom the size of a breadbox. Our bill was $289, almost three times the offer price. I told them to put the wheels back on and I would do it myself. The manager looked at me like I was an alien from the planet crazy. Evidently no one refuses to pay the revised price. They are used to people kowtowing and paying whatever amount they’re told to pay. He asked why I wanted to leave without getting the service done and I told him flat out that I could do it myself significantly cheaper. They halved their estimate and we drove out with new brakes for $140.

In this free market, the freedom comes from choice. We can choose where we shop and what we buy and, to a lesser extent, how much we pay. Once was a time when prices were not set and bartering was the norm. A shopper could negotiate the price at the point of sale. What we have now is a population blindly handing their money over when the market tells them to and tells them how much to pay. A free market is like a free country: it is only as free as the people make it and only remains that way as long as the people work to keep it that way.

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Isn’t Anything Else On?

Reminiscing is fun. Reliving memories of times past can bring pleasant feelings to mind and warm the cockles of one’s heart. There are not too many things I enjoy more than walking down memory lane and reliving the good times long gone. I am not alone, there is a whole industry dedicated to helping record the past for individuals as well as the media. Reminiscing is also a ratings giant. The news loves to remember the past, particularly if the past they are remembering is a story that garnered a lot of public attention. It can be like a two-fer for the stations. They get a rating boost when they break a big story, then another boost when they commemorate their coverage of the event.

The problem is that it is not just one news outlet doing the commemorations. Every news broadcast will spend a good chunk of their airtime reliving the past. This gets old fast. Hurricane Katrina hit the gulf coast five years ago and it was all the news that was reported for the better part of a week when it happened. It continued to dominate airtime for many weeks after. It got old then. I have no interest in reliving old news, so all the coverage of “Katrina five years later” got old again.

Two years ago, hurricane Ike ravaged Houston and naturally the local news spent every hour covering the effects of the storm. They spent so much time covering the storm that Houstonians didn’t learn about the financial crisis for weeks after the Fannie Mae and Freddie Mac bailout. This is understandable, however, as the storm aftermath was more significant to the citizens of Houston at that moment in time than the start of the recession.

I can understand commemorating a public figure after they die. Even the media blitz over Michael Jackson’s death was tolerable. These retrospectives can offer insight into the lives of society’s movers and shakers that we otherwise might not know. Commemorating significant historical events such as D-Day, Pearl Harbor or the Boston Tea Party is likewise beneficial. Examining New Orleans five years after a hurricane offers nothing more than an advertisement opportunity for the city’s hospitality industry.

Was Katrina devastating? Sure. No one can argue that. I lived in Houston when the refugees began pouring in from Louisiana. I saw the conditions they were forced to endure and the aftermath of the ruined communities and loss of life and property. I saw it—plenty of it. Life has moved on, why would I want to revisit it again? It is not a pleasant memory and it doesn’t offer us any insights into our condition today. There are plenty of other issues the news could be covering instead of rehashing this story.

I can only imagine that in 2013, we will get a blitz of Hurricane Ike revisited deluging our news, followed by the retrospective” Recession: five years later.” I know I will roll my eyes and put in a DVD or—as I have been doing lately—watching a Netflix stream on the big screen while I wait for the media to tire of this round of retrospectives.

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You’re Just Saying That

“You look good.” “I love your hair that way.” “No, no, no…plaid slacks are making a comeback.” These are all things we say in answer to questions we’d rather not answer truthfully. And the response is usually “Oh, you’re just saying that.” And we are. But the alternative is hurt feelings and at best an apology and at worst a night on the couch.

There is one area of life that the phrase actually is beneficial—even if it is a lie. There are reports all over the news—TV, Print and Web—that the housing market is on the rebound and that the recession is over. Many skeptics poohoo these assertions as being overly optimistic. These pundits maintain that the economy will take at least five years to recover from this devastating recession. These are also the same pundits who maintain that the recession started seven years ago.

If there is one thing that is a constant in our society, it is that we will listen to what is said loudest and longest. If enough people insist we are in a recession, then we believe we are in a recession. And—this is the important part—we ACT like we are in a recession. When we act like we are in a recession, we create a recession.

Our economy is one that works when money is flowing. You earn a buck, you spend a buck. The store that took your buck gives it to a bank who then gives it to someone else. That buck is then paid to someone as wages, and that person then spends that buck and the cycle continues. But suppose that the person who got the buck decided he didn’t want to spend the buck. Then the merchant won’t get the buck and have no bucks to give to the bank. The bank has fewer bucks, so they stop giving the ones they have to others and pretty soon, no bucks are moving anywhere. This is a recession.

What would make a person decide to hold on to the buck? Fear that there won’t be any more bucks coming. This in turn makes it so that no more bucks come. Why was he afraid? The media told him there was a recession coming. How do we fix it? Tell him the recession is over.

Wait a minute…just a cotton-pickin’ minute there, bub! There are thousands of people without jobs. What about them? You can’t tell them the recession is over. Well, yes we can, and the reason we can is that once people start spending again, then employers will start hiring again to fill the needs of the growing marketplace.

This is the big issue. People behave in set patterns. If they believe the recession is over, they will start spending again, the bucks will flow again and then, guess what? The recession will really be over. Even if you think they are lying when they say it, believe it. So when you hear the housing market is rebounding, take heart. When you hear the recession is over, feel confident. Go ahead and spend your money.

They’re not just saying that.

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